Meralco to ramp up capital spending this year

Danessa Rivera (The Philippine Star) - March 12, 2018 - 12:00am

https://www.philstar.com/business/2018/03/12/1795775/meralco-ramp-capital-spending-year

MANILA, Philippines — Manila Electric Co. (Meralco) is ramping up capital spending this year as it sees continued growth in demand and increase in customer count.

Meralco president Oscar Reyes said the power distributor plans to spend around P20- to P21-billion this year, higher than the amount spent in 2017.

“The capex for regulatory year (RY) 2019 is in the order of about P21 billion,” he said.

He said the earmarked amount would be used to finance requirements of its growing customer base and increasing power demand within its franchise area.

The budget will also be used to ensure resilient and hardened network to be able to meet the changes in climate.

“We have to ensure that the capex is something to serve the customer load growth, resiliency, safety and robustness including hardening. Also, assess the requirements of customers for enhanced services,” Reyes said.

The capital expenditure, however, has to be approved first by the Energy Regulatory Commission (ERC).

Last year, Meralco sought P18.36 billion in capital expenditures (capex) to expand and upgrade its network in RY 2018 – which starts on July 1, 2017 and ends on June 30, 2018 – to meet the growing power needs in its franchise area.

The capex application has yet to be cleared by the power regulator.

In 2016, Meralco earmarked P15.4 billion capex for 23 major projects and 83 residual projects for RY 2017, but the ERC only gave provisional authority for priority projects – nine major projects and 37 residual project – in the amount of P8.76 billion.

This is to allow Meralco to implement prioritized projects to ensure its ability to provide continuous safe and reliable service to its customers.

For RY 2016, the ERC approved lower capital spending for Meralco of P15.4 billion from its P17.5 billion to P18.5 billion original application.

Meanwhile, the company is still hopeful that some of its long-term power supply agreements (PSA) still pending with the ERC would be approved soon.

In April 2016, Meralco submitted seven PSAs to the ERC, covering 3,551 megawatts, which corner 81 percent of the combined output of seven power plants. However, nothing has been approved yet.

“They’re meant to meet additional demand. Plants take five to six years to build from conception,” Reyes said.

Any further delay in the approval of the power supply deals could translate to higher power rates for its 6.33 million customers in Metro Manila, Bulacan, Cavite, and Rizal, as well as certain areas in Batangas, Laguna, Pampanga, and Quezon.

“We don’t want to create any sort of fears or concerns but I think you just have to look at reality if you keep on delaying projects. Demand is not stopping,” Reyes said.

The increase in contracted rates is due to the negotiated costs with the engineering procurement contractor (EPC) and bank financing were lower at the time deals were entered into, the Meralco official said.

“We’ve been talking to them and we’re asking them to stay aboard. But there are validity dates for our EPC, financing,” he said.